Mutual Funds with CFCs: Take Note of BE-10 Reporting Requirements

May 22, 2015

Mutual funds with Controlled Foreign Corporations may need to file a BE-10 with the Bureau of Economic Analysis or request an extension before the reporting deadline.

A Controlled Foreign Corporation (CFC) is any corporation organized outside the United States that is more than 50% owned by US Shareholders[1]. A US Shareholder, in the case of a CFC, is defined as a US person that owns 10% or more of the foreign corporation[2]. Thus, CFCs, by their very nature, are more than 10% owned by US Shareholders. Accordingly, mutual funds with CFCs may be required to file a Bureau of Economic Analysis (BEA) BE-10 report.

Purpose of the BE-10

The BE-10 is a survey of US direct investment abroad that is conducted every five years. Using the BE-10, BEA collects information about US direct investment overseas, foreign direct investment in the United States, and international trade in services. BEA uses this information to compile various economic and statistical reports that help measure the performance of the US economy and the role of the United States in the global economy. Information submitted to BEA is confidential and used for economic and statistical reporting purposes only.

Reporting Requirements

A US company must file the BE-10 if, at any point during the company’s fiscal year ending in 2014, it had direct or indirect ownership or control of at least 10% of the voting stock of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise. The complete BE-10 is composed of multiple reports that cover a US business enterprise and its majority- and minority-owned affiliates. A BE-10A must be filed by the US Reporter[3], whereas the applicable report to be filed by a foreign affiliate is dictated by the amount total assets, sales, or gross operating revenues (excluding sales tax) or net income (after foreign income taxes) during the affiliate’s 2014 fiscal year. A detailed discussion of BE-10 reporting requirements can be found in our previous LawFlash.

Mutual Funds and CFCs

Mutual funds generally establish CFCs for the purpose of facilitating the funds’ investment strategies relating to investments in commodities, commodity-linked derivatives or other instruments. Per the requirements of the Investment Company Act of 1940, mutual funds own 100% of their CFCs. Because the reporting requirements for the BE-10 apply to US companies with at least 10% of the voting stock of an incorporated foreign business enterprise, mutual funds with CFCs may be subject to the requirements.[4]

Filing Deadlines and Extension Requests

US businesses with fewer than 50 foreign affiliates must file a completed BE-10 no later than May 29. That deadline is extended to June 30 for US businesses with more than 50 foreign affiliates. If a company has only recently discovered that it is subject to BE-10 reporting requirements and can’t meet its applicable deadline, it shouldn’t panic; we have found that BEA will grant reasonable requests for filing extensions if it receives such requests prior to the original deadline.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, D.C.
Katelyn Hilferty

Sean Graber

Paul Raymond

[1] IRC §957(a).

[2] IRC §958.

[3] “US Reporter” means the US person that has direct investment in a foreign business enterprise, including a branch. If the US person is an incorporated business enterprise, the US Reporter is the fully consolidated US domestic enterprise.

[4] Mutual funds without a CFC but which hold at least 10% of the voting stock in a foreign business enterprise may also be required to file a BE-10.